Monday, 19 March 2012

Today was another smack in the face for most of the bears. Interestingly, even clown channel appears increasingly edgy at the current uptrend. Yet nothing has changed, there is no fear out there. Every little pull back of 3, 5, or 7 pts is being bought up.

IWM was the most decisive index-breaker of the day

A clear break above the 83 resistance level -as I had suggested (and traded upon) last Friday. We certainly closed off the intra-day high, but its still an important close above a key level. The upper bol' of 87 is a very good primary target for those long right now...including yours truly.

SP' weekly...crawling up

Another 5pts on the Sp' today, the upper bol of 1435 is certainly the first soft target, with 1440 the next main target. Will the coming Greek bond interest payment allow the market to gap right over the next main level, solving that issue?

Why stop at sp'1414 ?

That's just it, it makes no sense for the market to stop here. Why would it? Sure, the VIX is low, the VIX 'skew' is at historic highs, but many cycles offer significantly more upside.

Sp' weekly, highlighting the 1440 level

Sp'1440 seems highly probable, and the trend remains very much aiming for 1550.

SP weekly, super bullish outlook, with fibs x2

The 1.6x fib from the recent 1078 October low is...none other than the precise area where the current upper channel line (pink), and the current near term trend line (grey) are both pointing at...1550.

Its something any permabear with serious money needs to consider in the coming days and weeks. As noted a few times already, if we break over 1440 (with consecutive closes over 1455/60), then another 100pts 'free money' is likely. For the bears, that is obviously a truly sickening thought.

Tis a sleepy Sunday night in the city. I have forced myself against tired eyes to throw out there a fair number of the possible outlooks. I have tried to again consider the more bullish outlooks.

Now, I sure don't believe the economy is actually going to improve - on an underlying basis, but as we've seen, the facts often don't matter when it comes to price-discovery in the current equity markets. So long as the central bankers keep on printing, that will cause underlying upward pressure on most asset classes. The only question is if they are they doing enough printing to counter the various deflationary pressures? I think even the Bernanke is forever pondering on that question.

So..lets start with...

SP' near term, monthly

Without question we are in a strong up trend, and the next key level is 1440 - which is what most agree to be the right shoulder of the 2007/8 H/S. Near term, 1440 looks very viable, we're only talking 2.5% !

The 'P3 hasn't even started yet theory' - scenario'1

This would be my immediate 'best guess'. It would assume there is NO QE3/ MBS buying by the Bernanke until the autumn. A price hit of around 1440, a few weeks trundling sideways, and then a gradually accelerating decline into early October. This scenario would assume we had 5 broad waves up from the 2009 low, and now we will soon begin a challenge to see if we can break below the ascending wedge.

This would make for a very curious situation, where once again the bears get excited with a 4-6 month decline, only to then get stuck - with a slightly higher low being put in place. For the bulls, a new all-time high in late 2013 would be a major victory. Further bouts of QE would certainly help this outcome. In terms of EW counts, I don't know if it'd be considered a 1,2 1,2 1....and soon another 2 lower. I am not well versed in 'the rules'.

SP' bearish outlook'3

Assumes no more QE this year, a 1440 peak, with a break back to the rising channel line - putting in a low of around 1150 this October. Here, we'd then look for a lower high in Spring 2013, that would then confirm a very gloomy outlook into latter 2013/14. The deflationist bears will be looking for this scenario.

SP' very bearish outlook'4

This is about as doomster as anything out there. The key issue would be that not only would a high be soon put in this March/April, but that the next wave lower will break the rising channel line of 1150, take out the hugely important psy' level of 1000, and break the market back into the mid/low 900s - before the first retrace back upward. The Bernanke will not want to see this outcome.

Mr VIX...real low right now

VIX decisively broke below what had been a nice floor for 6 weeks. The lower 'bollinger line is 11, that might be the ultimate low point, and equate to sp'1440..or would we need 1550 for a VIX of 9/10/11 ? Right now even a move 18 is irrevelent, and even a hit at 24 would not confirm any major bearish scenario.

So much time...so few scenarios. Strike that...reverse it!

Clearly, we are going to get a nice multi-month down cycle at some point. However, both weekly and monthly charts right now show no sign of a turn, and the trend IS up. Anyone still hitting the short button is walking in front of a slow moving 250,000 ton oil tanker.

Bears certainly can tout 1440 - as the next level of resistance. However, if we get a few stable closes above 1455/60, then that level can be thrown out, and would likely mean 1550/70 would be hit sometime this summer/early Autumn.

Four key issues that both sides need to keep in mind.

1. The rising channel line - which by this October will be up to 1150
2. The hugely important psy' level of 1000
3. The fact that the Bernanke will likely wish to do more QE (via MBS purchases) after the next wave lower (whenever that might be)
4. Looking at any of the scenarios, one interesting feature can be noted (and its probably one of the few things everyone can agree on), the market cycles/waves are arguably getting WILDER. Last years crazy action was pretty intense, not least the insane move back upward off the October low. Will 2012/13 be even more volatile?

One final note, regarding the world indexes. A post I did a week ago is important to keep in mind. This late March/April, the indexes will all be poised to break above key levels. If by May the indexes are all holding up okay, then a super bullish outcome looks very likely.

*I intend to cover the world indexes at least once a month on this blog, I next plan to update them over the weekend of March 31/April 1'st.
--

As I type this, the futures wheel has spun up to speed, and sp is +2/3pts. Its nothing much, but it sure ain't -10/15 as many bears would be dreaming of. We could easily break 1410 this Monday, and that should easily open the door to 1440.

You know, I do find it almost impossible to totally accept that we're even trading in the1400s again. It will remain my excuse if you notice I type 1340 instead of 1440. It is not a typing error, its probably just a case of wilful permabear denial.

Disclaimer: These pages (and especially all charts) are for informational purposes only. Most of the numerical data/calculations 'should' be correct. However, YOU make your own decisions as to if you think any comment or data point/chart is correct or not. All comments posted via Disqus/Google (or any other type) users may/may not be agreed with by yours truly.

I (Permabear Doomster) am not a financial advisor as officially endorsed by any national government, corporation, financial/securities regulatory authority in neither the USA, UK, or any part of the world. None of the posts/comments in these pages are intended as trading/investment advice. They are merely my opinion on where a given market/stock and any other 'instrument, index, etc' may move at any future time.